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Cyberonics

(CYBX)

rose Tuesday, the first gain since last Thursday when the Food and Drug Administration rejected the company's application for a pacemaker-like device to treat depression.

After markets closed Monday, Cyberonics announced it would disclose its second-quarter guidance next week, adding that it expected to make "meaningful upward adjustments in the earnings line," following the stunning setback from the FDA. That seemed to encourage investors who bid up the stock 39 cents, or 2.9%, to $13.94 in mid-morning trading Tuesday.

The FDA on Thursday overruled the recommendation of an FDA advisory panel, which endorsed the VNS Therapy device as a depression treatment. The panel voted 5-2 in June to support the device, which is surgically implanted into patients and which delivers mild shocks to stimulate a nerve in the brain called the vagus nerve.

Pamela B. Westbrook, the company's chief financial officer, said Monday that Cyberonics will provide an update on its regulatory options next week. She said guidance for the second quarter ending Oct. 29 would be adjusted favorably "due to reductions in depression spending."

Houston, Texas-based Cyberonics had been seeking approval for the device as a treatment for patients whose long-term depression isn't helped by medication, psychiatry or shock treatments. Given the advisory committee's vote, Cyberonics had been hoping for a positive ruling by the FDA in October; and it had been making preparations to hire more sales representatives.

The stock was crushed Thursday, losing 40%. Investors and analysts worried whether the company's existing use of VNS Therapy in treating epilepsy would be enough to carry Cyberonics until, or if, the company could convince the FDA to reconsider its decision.

Last week, on the day before the FDA's rejection, Cyberonics predicted a second-quarter loss of $9 million, or 38 cents a share, due to the anticipated extra expenses of launching VNS for depression. The consensus of analysts polled by Thomson First Call had been expecting a loss of $3.4 million, or 11 cents.